U.S. supply and demand for hides changing direction
Published: 15 May, 2020
Analysts at theSauerReport have observed a shift in the market dynamics over the past few weeks as the supply and demand balance appears to be changing. If the trend continues it may have an impact on raw material and hence leather prices, both up and down. The current market feels quite volatile.
For the third week in a row, the U.S weekly slaughter numbers have dipped below 500,000 head. Consumer demand for meat is there, along with the cattle to be sent to slaughter, but the covid-19 virus continues to cause disruption at meat plants across North America. With most restaurants and other food outlets still closed, the numbers would be back from normal times, but not by as much the data is suggesting. However, imported beef is currently filling some of the void and those cattle not being culled now will eventually need to be put into the food chain and it is possible that we will see a spike in the weekly slaughter numbers at some point soon.
With the beef supply down, the impact upon the hide supply chain has been felt in a positive way. A slow-down was exactly what was needed to halt the downward pressure on raw materials prices for sellers. As a consequence of the smaller supply, traders and direct suppliers have managed to continue selling along the low, but consistent price ranges.
Some packers and traders are now reporting their strongest forward sold positions for more than two years. It is hoped that when the tap is turned back on for the U.S. slaughter, then demand for hides will have increased to satisfy the extra supply, but this may be wishful thinking if this comes too soon. Just to put the supply into some form of context, the latest slaughter statistics show that supply is 32% down compared with the same week in 2019. One thing that is for sure is that the once these cattle do come to slaughter their average weights will be much higher, having spent longer in feedlots or on grasslands.
A dip in slaughter number comes against a backdrop of many tanners returning to work over the past few weeks and although it is clear that overall demand remains very weak, many have been active in the raw materials market searching for bargains from their suppliers. The combination is adding some volatility into the supply chain after a prolonged period of it being simply a buyers’ market.
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